No News Is Good News: CSR Strategy and Newspaper Coverage of Negative Firm Events

Jiao  Luo; Stephan  Meier; Felix  Oberholzer-Gee

Working Paper | HBS Working Paper Series | 2012

No News Is Good News: CSR Strategy and Newspaper Coverage of Negative Firm Events

by Jiao Luo, Stephan Meier and Felix Oberholzer-Gee

Abstract

One of the benefits of Corporate Social Responsibility (CSR) programs, it has been argued, is that they build up a reservoir of public good will, shielding companies in times of trouble. In this paper, we test the view that CSR provides protection from public ire by analyzing the media's response to corporate crises. Our application is spills in the oil industry. We find the media far more likely to report accidents if they occur at a company with a superior CSR record. Rather than acting as an effective form of insurance, our results suggest that a strong CSR record can be a liability. Moreover, the tone of coverage is no less critical for organizations with a greener reputation. At the same time, firms with substantial past environmental problems are also more likely to find their corporate failings broadcast in the news. Companies hoping to minimize the risk of media attention to accidents need to be careful not to place their organizations at the very top or the very bottom of CSR rankings. This result has important implications for thinking about CSR and the privately optimal level of such activities.

Keywords: Corporate Social Responsibility and Impact; Crisis Management; Media; Newspapers; Business and Community Relations; Corporate Strategy;

Language: English

Format: Print

28 pages

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Citation:

Luo, Jiao, Stephan Meier, and Felix Oberholzer-Gee. "No News Is Good News: CSR Strategy and Newspaper Coverage of Negative Firm Events." Harvard Business School Working Paper, No. 12-091, April 2012.

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This case centers around the shareholder dispute between three major shareholders of Turkcell, and how its management vied against increasing regulatory intervention and market competition in the absence of a fully-functioning board. The battle for control of the Turkish telecom giant led to several years in which the company could not hold annual shareholder meetings, renew its board of directors, or pay dividends, and lacked a board-approved operating budget. Nevertheless, it maintained its majority market share and was the only telecom player with positive EBITDA in the market. What were the implications of this dispute for Turkcell's broad ambitions? How would the continuing battle affect management, talent, and the company's financial performance?

Market imperfections are central to understanding the mechanisms that permit firms to capture value. Through competition, leading firms often reduce these imperfections, making markets more efficient. The remaining imperfections become a primary impetus for government intervention. Hence, understanding residual market imperfections—those imperfections that persist after market competition and regulation are accounted for—must undergird any assessment of the long-term attractiveness of firm strategies. Our proposed framework provides an integrated view of competition and government intervention, two of the principal forces that influence variation in firm profitability.

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No News Is Good News: CSR Strategy and Newspaper Coverage of Negative Firm Events

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